Reports of Tata Group and Bharti Enterprises discussions to evaluate a mega alliance involving their telecom, overseas cable and enterprise services, and direct-to-home TV businesses have been emerging. The discussions are at a nascent stage and there is no certainty regarding the alliance.
But if the merger does take place, there are a whole lot of issues that need to be addressed. Bharti Airtel, which will be the bigger partner and has a 40 percent market share, will have to take on Tata Communications’USD 4.5 billion debt. And the need for Bharti to spend USD 1.7 billion to pay for the much sought after 1800 Mhz band hat Tata Teleservices owns.
According to a report by Bank of America Merrill Lynch, Bharti’s track record while acquiring companies in the past has been quite “disciplined”. But this particular merger could prove to be a little bumpy, said the report.
As on the Tata front, the question remains as to what will happen to the government’s 26 percent share in their telecom business.
On the positive side, Bharti Airtel will be able to close the gap between the merged entity of Idea-Vodafone both in terms of numbers of subscribers as well as revenue market share and get access to a ready network.
For the Tata group, the alliance will provide an opportunity to turn their telecom business, which runs into loss right now, into a bigger company.
In September 2016, with the advent of Reliance Jio, the incumbent telecom companies had to implement the same policy of “pay less-get more” to keep up with the competition unleashed by Mukesh Ambani’s company. The three leading telecom companies Airtel, Vodafone and Idea Cellular had to slash tariffs by almost 67 percent. Falling revenues of existing players saw a consolidation in the telecom sector, with the biggest announcement being the merger of Idea and Vodafone. – Hindustan Times